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CSL is closing in on CBA to be the ASX’s biggest company

Tom Richardson
healthcare shares concept

CSL Limited (ASX: CSL) shares printed a record high of $280.10 today and the biotech market darling is closing in on Commonwealth Bank of Australia (ASX: CBA) in the race to be the ASX’s largest single-listing company. 

CSL shares are now up 56% over just the past year in an astonishing result for a blue-chip mega-cap business now valued around $127 billion.

Driving the rise has been a number of broker upgrades over the second half of 2019 valuing the stock at $300 or more.

Of course CSL is also operating strongly and forecasting another year of approximately 10% profit growth in FY 2020 to back up the double-digit profit growth delivered in FY 2019.

The growth largely down to favourable market dynamics where demand for its core immunoglobulin blood products keeps rising, while supply is restricted amongst competitors.

Finally the ultra-low interest rate environment is also making analysts’ estimates of the net present value of CSL’s future cash flows higher, even though the estimates of future cash flows are not changing.

The net present value of many reliable free cash flow growth stocks is higher, as analysts’ discount rates are being lowered due to the falling interest rate environment. 

CBA treading water 

CBA shares are only 2% higher over the last 5 years. This is due to the slowing local economy, falling credit growth, lower house prices, and tighter regulatory conditions. In particular regulators have clamped down on loose lending and demanded the banks maintain more return-on-equity-slicing idle capital in reserve. 

However, CBA still has a market value of $144 billion and fair lead on CSL.

In fairness BHP Group Ltd (ASX: BHP) has a combined market value around $190 billion when including its ASX and London listings.

So the bank and biotech are still far off the Broken Hill-founded mining giant. 

The post CSL is closing in on CBA to be the ASX’s biggest company appeared first on Motley Fool Australia.

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Tom Richardson owns shares of CSL Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019